Robert J. Shiller, a 2013 Nobel laureate in economics, is Professor of Economics at Yale University and the co-creator of the Case-Shiller Index of US house prices. He is the author of Irrational Exuberance, the third edition of which was published in January 2015, and, most recently, Phishing for P…read more

Live Long and Prosper

Living a long time is one of our deepest wishes, and medical and economic progress offers the hope that it will be fulfilled. Some scientists say that the average human lifespan could reach 90 years or more by mid-century. But what if our wish is granted? What good is a longer life if we cannot maintain our standard of living?

The fundamental difficulty in planning for enhanced longevity is that we do not know whether it will really happen. Life expectancy might well be only 80 years by mid-century – about where it is now in advanced countries – if medical progress is disappointing or is offset by new threats or hazards. If we make provisions for long lives that are cut short, we will have wasted huge amounts of precious economic resources. But if we fail to make provisions for lives that are longer, many elderly people will be condemned to poverty.

The whole direction of any country’s economy depends on longevity. A huge number of elderly people would mean a lot of people wanting to live in certain locations, seeking certain kinds of living quarters, and consuming certain kinds of services. The types of corporations that will succeed, the buildings that are constructed, and the research and development that will be needed all depend on the demographics of demand.

This is true of the global economy as well. In his 2005 book The Future for Investors , Jeremy Siegel argues that differences across countries in longevity will interact with differences in wealth levels to form a fundamental determinant of economic relations among countries. Trade flows may be driven substantially by longevity: countries expecting a relatively large number of elderly in the future should be running trade surpluses now and deficits later.

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